Gibraltar to implement global minimum tax from 2025

Gibraltar is seeking to implement a new tax regime for companies within the scope of OECD’s proposed Pillar Two tax rules, together with a domestic minimum top-up tax, announced Chief Minister Fabian Picardo in the Budget Address on 11 July.

Picardo said that the harmonisation of a minimum global tax rate under the OECD’s Pillar two initiative was a significant and important change to the international tax scene. The Global Anti-Base Erosion (GloBE) rules under Pillar Two will introduce a global minimum corporate tax rate of 15% for large multinational enterprises (MNEs) with revenue above €750 million.

The GloBE rules provide for a co-ordinated system of taxation intended to ensure large MNE groups pay this minimum level of tax on income arising in each of the jurisdictions in which they operate. The rules create a ‘top-up tax’ to be applied on profits in any jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the minimum 15% rate.

The standard corporate income tax (CIT) rate is 12.5% in Gibraltar, having increased from 10% in August 2021. Companies are only subject to Gibraltar taxation on income accrued in and derived from Gibraltar.

Picardo reiterated the government’s commitment to implementing a domestic regime that meets the objectives of the Pillar two initiative, while maintaining economic prosperity for both Gibraltar and its business community.

“Our efforts are focused on supporting our largest companies, on continuing to make Gibraltar an attractive jurisdiction for them and to encourage them to continue to invest in us,” he said. “We are in this together. We have supported you since first setting up in Gibraltar and we will not abandon you now,” he said, referring to large companies.

Picardo said that the government would therefore be commencing a consultation process to ensure that domestic implementation considered recommendations and views from key stakeholders, taxpayers and interested parties.

“The international implementation of Pillar two is not uniform. Jurisdictions are seeking to implement domestic regimes as best suits their circumstances. Those with large numbers of ultimate parent entities of multinational groups are keen to see implementation rapidly. The UK is an example,” said Picardo.

“Their implementation is expected to apply to accounting periods commencing on or after 31 December 2023. By contrast, the Isle of Man and the Channel Islands have delayed their implementation to 2025. Similarly, the EU’s Global Minimum Tax Directive allows Member States with few ultimate parent entities to defer implementation for up to six consecutive fiscal years starting as from 31 December 2023.”
He said it was evident that there were significant considerations and administrative burdens for smaller states that needed to be recognised and addressed.

“This is why Gibraltar’s implementation will take effect no earlier than accounting periods beginning on or after 31 December 2024. Allowing this additional time also provides Gibraltar with a window during which international developments can be monitored, allowing us to adapt accordingly to best practices and evolving requirements,” said Picardo.

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